Fed’s Fisher: Market’s ‘Feral Hogs’ Can’t Break The Fed – FT

By Michael Aneiro

A hawk with a piscine name took to a salmon-colored paper today to warn hogs not to mess with a known doves’ nest. Put another way, Dallas Fed President Richard Fisher told the Financial Times that the “feral hogs” of financial markets shouldn’t think they can force the Fed to abandon its plans to curtail its bond-buying programs. From the FT:

[Fisher] said in an interview with the Financial Times that the Fed had anticipated a lively market reaction to last week’s announcement that it was considering bringing an end to its $85bn/month bond purchases.

But Mr Fisher, a member of the rate-setting Federal Open Market Committee, warned that markets should not think the Fed would end up propping up the economy indefinitely, or that it could be pushed to keep buying treasuries at the same pace and, in so doing, keep inflating asset price bubbles….

“Markets tend to test things,” Mr Fisher told the FT….I don’t think anyone can break the Fed . . . But I do believe that big money does organise itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”

Fisher is one of the most hawkish policy makers at a Federal Reserve where a trio of so-called doves – Ben Bernanke, Janet Yellen and William Dudley – effectively set the course for policy. Financial markets have been in a state of rebellion since last Wednesday when the Fed gave its strongest hint yet that it’s getting closer to cutting back on its $85 billion monthly bond purchases. Since then bond yields have soared and stock markets have tanked.

Fisher’s comments come on a day when the Fed appears to have deployed its full damage-control tactical response unit, consisting of multiple Fed officials not named Bernanke speaking out publicly about Fed policy and explaining how markets have misconstrued the Fed’s intentions or how the Fed could work on managing market expectations. Here are New York Fed President William Dudley speaking in Switzerland today:

[T]he central bank has a major role to play in ensuring financial stability and should evaluate the stance of monetary policy in light of problems in the financial system that may impair the monetary policy transmission mechanism.”

And Minneapolis Fed President Narayana Kocherlakota took the unusual step of issuing a statement on Monday in which he “argue[s] that the [Fed policy committee’s] communications have provided insufficient detail about how its policy strategy will play out when the recovery is more advanced” and “describe[s] how the Committee can reduce residual policy uncertainty, and so better achieve its goals, by providing this missing clarity in future communications.” He reiterated that he thinks the Fed should keep on buying bonds for now, and also should hold rates near zero until the unemployment rate falls to 5.5%, well below the Fed’s stated 6.5% target and even further below the most recent 7.6% reading for May.